Limson vs CA

Spouses de Vera gave Limson a 10-day option to buy a parcel of land in Paranaque, wherein Limson gave
P20,000 as “earnest money. De Vera told Limson that the land was mortgaged to spouses Ramos. During
the 10 day period, there were 2 attempts to meet; in the 1 st attempt, Spouses Ramos failed to appear, in
the 2nd attempt the transaction again did not materialize as respondent spouses failed to pay the back
taxes of subject property. Also during the 10 day period, Limson learned that the land was the subject of
sales negotiations between Sunvar Realty Development Corporation (Sunvar) and the de Veras. Sunvar
was able to purchase the property outside the 10 day period, but the deed of sale had a annotation of
adverse claim as Limson alleged that she had a claim to the land, and that she informed Sunvar of her
adverse claim. Limson’s main argument was that there was already a contract to sell between her and
the de Veras and that the P20,000 she gave was part of the purchase price. Limson moved for the
annulment of the sale and cancellation of title issued to SUNVAR.

Whether there was a contract of sale between Limson and de Vera –NO

The agreement between the parties was a contract of option and not a contract to sell (See Note 1 for
discussion of contract of option). It seems that there was no clear acceptance of the offer to purchase
during the 10 day period.

The consideration of P20,000.00 paid by petitioner to respondent spouses was referred to as "earnest
money." However, a careful examination of the words used indicated that the money is not earnest
money but option money (See note 2 for discussion of option money) (See note 3 for the contents of the
receipt) There is nothing in the Receipt which indicates that the P20,000.00 was part of the purchase
price. Moreover, it was not shown that there was a perfected sale between the parties where earnest
money was given. Finally, when petitioner gave the "earnest money" the Receipt did not reveal that she
was bound to pay the balance of the purchase price. In fact, she could even forfeit the money given if
the terms of the option were not met. Thus, the P20,000.00 could only be money given as consideration
for the option contract.

As to whether de Vera was at fault for the non-consummation of their contract with Limson, the court
finds that de Vera should not be be blamed.

 First, within the option period, or on 4 August 1978, it was de Vera and not Limson who
initiated the meeting at the Office of The Register of Deeds of Makati.
 Second, that the Ramoses filed to appear on 4 August 1978 was beyond the control of de Vera.
 Third, the succeeding meetings that transpired to consummate the contract were all beyond the
option period and, as declared by the Court of Appeals, the question of who was at fault was
already immaterial.
 Fourth, even assuming that the meetings were within the option period, the presence of Limson
was not enough as she was not even prepared to pay the purchase price in cash as agreed upon.
Finally, even without the presence of the Ramoses, petitioner could have easily made the
necessary payment in cash as the price of the property was already set at P34.00 per square
meter and payment of the mortgage could every well be left to de Vera.

Limson further claims that when de Vera sent her a telegram demanding full payment of the purchase
price outside of the 10-day period, it was an acknowledgment of their contract to sell, thus denying
them the right to claim otherwise. The court finds that the telegram only showed that respondent
spouses were willing to give petitioner a chance to buy subject property even if it no longer exclusive

Notes

1.) An option, as used in the law of sales, is a continuing offer or contract by which the owner
sitpulates with another that the latter shall have the right to buy the property at a fixed price
within a time certain, or under, or in compliance with, certain terms and conditions, or which
gives to the owner of the property the right to sell or demand a sale. It is also sometimes called
an "unaccepted offer." An option is not itself a purchase, but merely secures the privilege to
buy. It is not a sale of property but a sale of right to purchase. It is simply a contract by which
the owner of property agrees with another person that he shall have the right to buy his
property at a fixed price within a certain time. He does not sell his land; he does not then agree
to sell it; but he does not sell something, i.e., the right or privilege to buy at the election or
option of the other party.10 Its distinguishing characteristic is that it imposes no binding
obligation on the person holding the option, aside from the consideration for the offer. Until
acceptance, it is not, properly speaking, a contract, and does not vest, transfer, or agree to
transfer, any title to, or any interest or right in the subject matter, but is merely a contract by
which the owner of the property gives the optionee the right or privilege of accepting the offer
and buying the property on certain terms.
2.) "Earnest money" and "option money" are not the same but distinguished thus; (a) earnest
money is part of the purchase price, while option money is the money given as a distinct
consideration for an option contract; (b) earnest money given only where there is already a sale,
while option money applies to a sale not yet perfected; and, (c) when earnest money is given,
the buyer is bound to pay the balance, while when the would-be buyer gives option money, he
is not required to buy, but may even forfeit it depending on the terms of the option.
3.) Received from Lourdes Limson the sum of Twenty Thousand Peso (P20,000.00) under Check No.
22391 dated July 31, 1978 as earnest money with option to purchase a parcel of land owned by
Lorenzo de Vera located at Barrio San Dionisio, Municipality of Parañaque, Province of Rizal with
an area of forty eight thousand two hundred sixty square meters more or less at the price of
Thirty Four Pesos (34.00)16 cash subject to the condition and stipulation that have been agreed
upon by the buyer and me which will form part of the receipt. Should the transaction of the
property not materialize not on the fault of the buyer, I obligate myself to return the full amount
of P20,000.00 earnest money with option to buy or forfeit on the fault of the buyer. I guarantee
to notify the buyer Lourdes Limson or her representative and get her conformity should I sell or
encumber this property to a third person. This option to buy is good within ten (10) days until
the absolute deed of sale is finally signed by the parties or the failure of the buyer to comply
with the terms of the option to buy as herein attached.

Atkins vs Hian Tek

Atkins sent a letter providing for a “firm offer to sell” sardines to Hian Tek subject to reply by Sept 23
1951. Hian Tek accepted the offer by Sept 21, 1951, but Atkins failed to deliver the produce. Hian Tek
now sues Atkins, but Atkins argues that there was no obligation for him to deliver the produce as there
was no contract of sale, says petitioner, but only an option to buy, which was not enforceable for lack of
consideration as per Art. 1479 of the New Civil Code.

Whether there was an obligation on the part of Atkins to deliver? –YES

Atkins had the wrong interpretation of 1479. 1479 only speaks of the offeror’s obligation to maintain his
offer if the offer was supported by a consideration. If the offer was supported by a consideration, the
offeror cannot unilaterally withdraw his offer, if there is no consideration for the offer he can withdraw
at any time before acceptance. In any case, if there is an acceptance by the person offered, there is now
an obligation on the part of the offeror to sell regardless of whether the option was supported by a
consideration or not, as there is now a contract of sale.

In this case there was now a contract of sale as there was acceptance on the part of Hian Tek.

Ang Yu vs CA

The Tiongs were lessees of a property owned by Cu Unjieng. Unjieng wanted to sell the property and
gave the Tiongs priority to acquire the same. They entered into negotiation, wherein Cu Unjieng offered
5M, while TIong counter-offered 4M. Tiong sent a letter asking Cu Unjieng to specify the terms and
conditions of the offer to sell. Un Jieng did not reply, and instead negotiated with Buen Realty and
Development Corporation (Buen). Tiong filed the complaint to compel defendants to sell the property to
them. The RTC ruled that Tiong had “the right of first refusal”. Tiong filed a motion for execution for
defendants to enter into a contract of Sale with Tiong. The RTC granted, but the CA nullified the orders
of the RTC.

Whether Atkins may be compelled to sell the property to Tiong because of the “right of first refusal”
given by Atkins –NO

A right of first refusal is neither a contract of sale, an option nor an offer within the purview of law. An
option or an offer would require, among other things, a clear certainty on both the object and the cause
or consideration of the envisioned contract. In a right of first refusal, while the object might be made
determinate, the exercise of the right, however, would be dependent not only on the grantor's eventual
intention to enter into a binding juridical relation with another but also on terms, including the price,
that obviously are yet to be later firmed up. Prior thereto, it can at best be so described as merely
belonging to a class of preparatory juridical relations governed not by contracts (since the essential
elements to establish the vinculum juris would still be indefinite and inconclusive) but by, among other
laws of general application, the pertinent scattered provisions of the Civil Code on human conduct.

Even on the premise that such right of first refusal has been decreed under a final judgment, like here,
its breach cannot justify correspondingly an issuance of a writ of execution under a judgment that
merely recognizes its existence, nor would it sanction an action for specific performance without
thereby negating the indispensable element of consensuality in the perfection of contracts.11 It is not to
say, however, that the right of first refusal would be inconsequential for, such as already intimated
above, an unjustified disregard thereof, given, for instance, the circumstances expressed in Article 1912
of the Civil Code, can warrant a recovery for damages.
The final judgment in Civil Case No. 87-41058, it must be stressed, has merely accorded a "right of first
refusal" in favor of petitioners. The consequence of such a declaration entails no more than what has
heretofore been said. In fine, if, as it is here so conveyed to us, petitioners are aggrieved by the failure of
private respondents to honor the right of first refusal, the remedy is not a writ of execution on the
judgment, since there is none to execute, but an action for damages in a proper forum for the purpose.

Bible Baptist vs CA

Bible Baptist Church (Bible) was a lessee of property owned by Villanueva. The lease agreement had a
stipulation for an option to buy on the part of Bible (See Note 1 for the terms). Bible Baptist argues that
such option to buy was enforceable against Villanueva as Bible paid a separate consideration; P84,000
(which was however used as an advance od rental fees at a rate of P7,000 a year = rent for 1 year). The
84,000 was used by Villanueva to clear a mortgage on the property.

Whether the option was supported by a consideration, thus binding Villanueva? –NO

The rent cannot be considered as a separate consideration sufficient to bind Villanueva as it was proven
that the amount was actually used as advance rental fees, and so Bible did not need to pay rent for a
year.

Bible tried to argue that the consideration requirement need not be monetary in nature. In this case,
Bible argues that the fact that it advanced rental payment was sufficient to qualify as consideration.
While the Court agrees that consideration need not be case, consideration must be something of value
as the nature of an option contract was onerous. In this case Bible did not provide anything onerous as
separate consideration.

To summarize the rules, an option contract needs to be supported by a separate consideration. The
consideration need not be monetary but could consist of other things or undertakings. However, if the
consideration is not monetary, these must be things or undertakings of value, in view of the onerous
nature of the contract of option. Furthermore, when a consideration for an option contract is not
monetary, said consideration must be clearly specified as such in the option contract or

Notes

1.) That the LESSEE has the option to buy the leased premises during the Fifteen (15) years of the
lease. If the LESSEE decides to purchase the premises the terms will be: A) A selling Price of One
Million Eight Hundred Thousand Pesos (P1.8 million), Philippine Currency. B) A down payment
agreed upon by both parties. C) The balance of the selling price may be paid at the rate of One
Hundred Twenty Thousand Pesos (P120,000.00), Philippine Currency, per year.
2.) In Villamor v. Court of Appeals,16 half of a parcel of land was sold to the spouses Villamor for
P70 per square meter, an amount much higher than the reasonable prevailing price. Thereafter,
a deed of option was executed whereby the sellers undertook to sell the other half to the same
spouses. It was stated in the deed that the only reason the spouses bought the first half of the
parcel of land at a much higher price, was the undertaking of the sellers to sell the second half
of the land, also at the same price. This Court held that the cause or consideration for the
option, on the part of the spouses-buyers, was the undertaking of the sellers to sell the other
 half of the property. On the part of the sellers, the consideration supporting the option was the
much higher amount at which the buyers agreed to buy the property. It was explicit from the
deed therein that for the parties, this was the consideration for their entering into the contract.

Osmeña III vs. Power Sector Assets and Liabilities Management Corporation

PSALM sold the Naga Land-Based Gas Turbine (LBGT) and leased the land underlying the LBGT for a
period of 10 years to SPC Power Corporation (SPC). through an Asset Purchase Agreement (LBGT-APA)
and a Land Lease Agreement (LBGT-LLA) respectively. The LBGT-LLA contained a provision for SPC's right
to top in the event of lease or sale of property which is not part of the leased premises. PSALM held a
bidding for the sale of the Naga Power Plant Complex (NPPC) which was coincidentally located inside the
same compound but outside the leased premises of the SPC. Therma Power Visayas, Inc. (TPVI) was the
winning bidder. SPC then informed NPC that it is exercising the right to top the winning bid of TPVI.

Whether the SPC’s right to top should be upheld? –NO

A right to top is a variation of the right of first refusal often incorporated in lease contracts. When a
lease contract contains a right of first refusal, the lessor is under a legal duty to the lessee not to sell to
anybody at any price until after he has made an offer to sell to the latter at a certain price and the lessee
has failed to accept it. The lessee has a right that the lessor's first offer shall be in his favor. Generally,
the court upholds the lessee’s right of first refusal if it is founded on an interest on the object over which
the right of first refusal is to be exercised.

In this case, PC's right to top under the LBGT-LLA is void for lack of a valid interest or right to the object
over which the right of first refusal is to be exercised given that:

1. the property subject of the right of first refusal is outside the leased premises covered by the
LBGT-LLA.
2. the right of first refusal refers not only to land but to any property within the vicinity of the
leased premises, as in this case, an entire power plant complex (NPPC) and the land on which it
is built.
3. while SPC cited concerns regarding security, right of way or other operational requirements,
these are clearly not analogous to a lessee's legitimate interest on the property being leased.
Indeed, acquisition of a three coal-fired thermal plants with far greater generating capacity than
the gas turbine plant currently owned by SPC will not be merely for purposes of the latter's
reasonable access, security or present operational needs. Besides, no such right or interest may
be invoked by SPC because, as confirmed by PSALM itself, SPC never operated the Naga LBGT.

Notes

1.) Option vs Right of First Refusal

a. The Court has clearly distinguished between an option contract and a right of first
refusal. An option is a preparatory contract in which one party grants to another, for a
fixed period and at a determined price, the privilege to buy or sell, or to decide whether
or not to enter into a principal contract. It binds the party who has given the option not
to enter into the principal contract with any other person during the period designated,
and within that period, to enter into such contract with the one to whom the option was
 granted, if the latter should decide to use the option. It is a separate and distinct
contract from that which the parties may enter into upon the consummation of the
option. It must be supported by consideration. In a right of first refusal, on the other
hand, while the object might be made determinate, the exercise of the right would be
dependent not only on the grantor's eventual intention to enter into a binding juridical
relation with another but also on terms, including the price, that are yet to be firmed up.
b. In a right of first refusal, on the other hand, while the object might be made
determinate, the exercise of the right would be dependent not only on the grantor's
eventual intention to enter into a binding juridical relation with another but also on
terms, including the price, that are yet to be firmed up.

Repuela vs. Estate of Spouses Larawan and Bacus

The Repuela brothers (Marcelino and Cipriano) inherited the property of their parents. One day,
Marcelino (need to go to Iligan, but he had no money for the fare, so the brothers approached Otillo
Larawan to borrow money. Otillo agreed but the brothers needed to mortgage the title of the inherited
property. The brothers did. Cipriano signed a contract and Marcelino affixed his thumb mark. For 39
years, the Repuela brothers continued to possess and till the land. One day, the daughter of Cipriano
discovered that the old TCT was cancelled and the property was already in the name of Otillo through a
Extrajudicial Declaration of Heirs and Sale. Apparently, the contract signed by the Repuelas years ago
was not a Deed of Mortgage. The Repuelas filed a petition RTC for the annulment of the Extrajudicial
Declaration of Heirs and Sale and the cancellation of TCT No. 10506. The lower courts ultimately denied
the petition.

Whether the contract entered into by the Repuelas was a valid sale –NO

The Court finds that the contract entered into by the parties was not a sale (although the physical
contract appears to be one of sale) but an equitable mortgage. An equitable mortgage is one which,
although lacking in some formality, or form, or words, or other requisites demanded by a statute,
reveals the intention of the parties to charge real property as security for a debt, and contains nothing
impossible or contrary to law.

For a presumption of an equitable mortgage to arise, two requisites must first be satisfied, namely:

2.) that the parties entered into a contract denominated as a contract of sale and
3.) that their intention was to secure an existing debt by way of mortgage.

There is no single conclusive test to determine whether a deed of sale, absolute on its face, is really a
simple loan accommodation secured by a mortgage. Article 1602, in relation to Article 1604 of the Civil
Code, however, enumerates several instances when a contract, purporting to be, and in fact styled as,
an absolute sale, is presumed to be an equitable mortgage. Thus:

ART. 1602. The contract shall be presumed to be an equitable mortgage, in any of the following cases:

(1) When the price of a sale with right to repurchase is unusually inadequate;
(2) When the vendor remains in possession as lessee or otherwise;
(3) When upon or after the expiration of the right to repurchase another instrument extending the
period of redemption or granting a new period is executed ;
 (4) When the purchaser retains for himself a part of the purchase price;
(5) When the vendor binds himself to pay the taxes on the thing sold;
(6) In any other case where it may be fairly inferred that the real intention of the parties is that the
transaction shall secure the payment of a debt or the performance of any other obligation

In this case, it appears that two (2) instances enumerated in Article 1602 — possession of the subject
property and inference that the transaction was in fact a mortgage attended the assailed transaction.

Furthermore, it must be pointed out that the law accords the equitable-mortgage presumption in
situations when doubt exists as to the true intent of the parties to the contract

Whether Laches prevents the brothers from questioning the sale? –NO

Where there is no consent given by one party in a purported contract, such contract was not perfected;
therefore, there is no contract to speak of. The deed of sale is deemed a void contract. This being so, the
action based on said deed of sale shall not prescribe in accordance with Article 1410 of the Civil Code.

Notes

1.) It must be noted that when the brothers entered into the contract Cipriano only finished Grade
1, and Marcelino was unschooled.
2.) The respondent's claim of possession, as supported by a transfer certificate of title and tax
declaration of the subject property, both in the name of Spouses Larawan is, to the Court's
mind, not persuasive. These documents do not prove actual possession.

Heirs of Alido vs. Campano

Alido had a parcel of land registered to her name. Later, Campano was able to take possession of the
land and a duplicate copy of the OCT. She alleges that the land was sold to her, but the sale was not
through a public document. Alido died. Her heirs sought to register the land in their name, but they
needed the OCT in the hands of Campano. Campano refused to give the OCT. The heirs filed a petition to
have Campano surrender the OCT. The RTC rules in favor of the heirs as the alleged sale to Campano
was void as it was notput into writing The CA reversed, ruling that the children were barred by laches.

Whether the sale to Campano was void –YES

The sale to Campano was void not because it was not put into writing, but because it was in violation of
the Homestead Patent Law

The fact that the sale was not put into writing only made the sale unenforceable under Art 1358 and
1403. It is binding, but it cannot be executed. In this case, no execution was necessary as the verbal sale
between Campano and Alido had been executed.

The sale, however, is void because it was sold withing the 5 year prohibition under the the Homestead
Patent Law (it was sold 3 years after acquisition. Campano tried to argue that the void sale cannot be
questioned as she and Alido were in pari delicto as they both knoew that the sale was illegal. The court
however finds that the in pari delicto principle does not apply when prohibition by the law is designed
for the protection of the plaintiff. The Homestead Patent Law protects the grantee, and so the grantee
may raise the void status of the sale.
Whether the CA was correct in ruling that the heirs were in laches? –NO

Laches does not apply if the assailed contract is void ab initio.

Notes

1.) The case was remanded to the RTC as the purchase price should be returned to Campano, and
there was no factual determination was made with regard to the purchase price

Racelis vs Javier

Nacu appointed his daughter Racelis to sell his property in Marikina. Spouses Javier offered to purchase
the Marikina property, however, they could not afford to pay the price of ₱3,500,000.00 They offered
instead to lease the property while they raise enough money. Racelis hesitated at first but she
eventually agreed. Throughout the period of lease, Spouses Javier paid a total of 78,000 as goodwill
money to show their dedication to purchase the property. Eventually the Javiers failed to pay rent.
Racelis filed a petition for ejectment and to claim the unpaid rentals. During the pendency of the case ,
they eventually left. The only issue left to be resolved was the amount of damages in the form of unpaid
rentals to which Racelis was entitled. The Javiers argue that the P78,000 paid by them should be applied
to the unpaid rent.

Whether the P78,000 paid by the Javiers may be used to offset the remaining unpaid rent of P84,000?
–NO

The payment cannot be characterized as advanced rent - The ₱78,000.00 initial payment cannot be
characterized as advanced rent. First, records show that respondents continued to pay monthly rent
until February 2004 despite having delivered the ₱78,000.00 to petitioner on separate dates in 2003.
Second, as observed by the Metropolitan Trial Court, respondents indicated in the receipt that the
₱78,000.00 was initial payment or goodwill money. They could have easily stated in the receipt that the
₱78,000.00 was advanced rent instead of denominating it as "initial payment or goodwill money."
Respondents even proposed that the initial payment be used to offset their accrued rent.

The payment cannot be characterized as earnest money which perfects the sale – While Article 1482 of
the Civil Code provides that earnest money may be used to prove the perfection of the contract of sale,
this is merely a disputable presumption, which prevails in the absence of contrary evidence. In this case,
petitioner and respondents executed a contract to sell, not a contract of sale. Racelis reserved
ownership of the property and deferred the execution of a deed of sale until receipt of the full purchase
price. This may be seen in the letter sent by Racelis to Javier (See Note 1)

Racelis gets to keep the 78,000 - In a contract to sell, earnest money is generally intended to
compensate the seller for the opportunity cost of not looking for any other buyers. It is a show of
commitment on the part of the party who intimates his or her willingness to go through with the sale
after a specified period or upon compliance with the conditions stated in the contract to sell

Earnest money, therefore, is paid for the seller's benefit. It is part of the purchase price while at the
same time proof of commitment by the potential buyer. Absent proof of a clear agreement to the
contrary, it is intended to be forfeited if the sale does not happen without the seller's fault (it is paid for
the loss of opportunity on the part of the owner as he loses the opportunity to find another buyer)
Notes

1.) It was our understanding that pending your purchase of the property you will rent the same for
the sum of ₱10,000.00 monthly. With our expectation that you will be able to purchase the
property during 2002, we did not offer the property for sale to third parties. We even gave you
an extension verbally for another twelve months or the entire year of 2003 within which we
could finalize the sale agreement and for you to deliver to us the amount of ₱3.5 Million, the
agreed selling price of the property. However, to this date, we are not certain whether or not you
have the capacity to purchase the property. The earnest money of ₱100,000 that we initially
agreed upon only reached ₱78,000 as of date accumulated through several installments during
2003. It is not our intention to wait for a long time to dispose theproperty since you are very
much aware of the situation of my mother

Ayala Land vs ASB

Ayala Land entered into a contract to sell with EMRASON over a parcel of land. Specifically, it entered
into a contract with the heirs of Ramos Sr. (the President of the Corporation. Ayala alleges that Ayala
was lead to believe that the heirs were authorized to represent EMRASON as Ramos Sr. sent it a letter to
that effect. Later EMRASON entered into a mortgage contract with ASBRC over the same property.
EMRASON later filed a petition in the RTC for the cancellation of the Contract to Sell. The lower court
granted the petition on the ground that the heirs did not have sufficient authority to enter into the
contract. Hence this petition

Whether the heirs had sufficient authority to enter into a contract to sell. –NO

For juridical entities, consent is given through its board of directors juridical entity, like EMRASON,
"cannot act except through its board of directors as a collective body, which is vested with the power
and responsibility to decide whether the corporation should enter into a contract that will bind the
corporation, subject to the articles of incorporation, by-laws, or relevant provisions of law." 47 Although
the general rule is that "no person, not even its officers, can validly bind a corporation" 48 without the
authority of the corporation's board of directors, this Court has recognized instances where third
persons' actions bound a corporation under the “doctrine of apparent authority or ostensible agency”
(See note 1).

In this case, Ayala alleges that EMRASON, through the letter of the President, made it appear that the
heirs had authority to enter into a contract to sell. The court finds, however, that the letter only gave the
heirs the authority to negotiate. Without any other evidence, the heirs have no apparent authority to
enter into a contract with Ayala.

Whether the President of EMRASON could enter into a contract for the corporation? –YES

Note: This is with regard to the validity of the Real Estate Mortgage entered into by EMRASON with ASB

It has been held in other jurisdictions that the president of a corporation possesses the power to enter
into a contract for the corporation, when the 'conduct on the part of both the president and the
corporation [shows] that he had been in the habit of acting in similar matters on behalf of the company
and that the company had authorized him so to act and had recognized, approved and ratified his
former and similar actions.

Here, Ramos, Sr.'s authority to execute and enter into the Letter-Agreement with ASBRC was clearly
proven. We quote with approval the RTC's finding thereon, to wit:

Emerito Ramos, Sr. testified that on 17 May 1994[,] a special Board meeting was called to discuss
various proposals regarding the Dasmariñas Property. In attendance were Emerito Ramos, Sr., Rogerio
Escobal and Arturo de Leon. After some discussion, the Board resolved to accept the proposal of ASB
Realty being the most advantageous and beneficial to EMRASON. In the said meeting, the Board [of]
Directors also agreed, viz[.]: that Emerito Ramos, Sr. shall be authorized to accept the cash advance from
ASB in his personal capacity; and that Emerito Ramos, Sr. and Antonio Ramos shall be authorized to
execute a Real Estate Mortgage in favor of ASB. Then, he identified the Minutes of the aforesaid Board
Meeting and the signatures of the members of the board appearing thereon. He further alleged that at
4:00 in the afternoon of 17 May 1994 a Stockholders['] Meeting was subsequently held. He alleged that
there was a quorum during the said meeting considering that he was present and the act that he owns
2/3 of the subscribed capital of EMRASON.

Notes

1.) Whenever a party has, by his own declaration, act, or omission, intentionally and deliberately
led another to believe a particular thing true, and to act upon such belief, he cannot, in any
litigation arising out of such declaration, act or omission, be permitted to falsify it.
2.) In this case, the court rules that it should be dismissed as what was raised by Ayala were
Question of FACTS

Fullido vs Grilli

Grilli was an Italian national while Fullido was a Filipino. They were lovers (they had a common law
relationship). Fullido owned a plot of land within which Grilli had a house built. They entered into a lease
agreement wherein Grilli would rent the lot for 50 years for P10,000 (for the whole 50 year term), and
that Fullido cannot perform acts of ownership over the land for the term. They also entered into a
Memorandum Agrement which said that Grilli was actually the owner of the house and lot. Their
relationship soured after 16 years (they both accused each other of infidelity). Grilli then filed a
complaint for unlawful detainer against Fullido. The lower courts granted the petition. Hence this
petition

Whether the complaint for unlawful detainer may prosper –NO

In a complaint for unlawful detainer, the complainant in an unlawful detainer case must have some right
of possession over the property. In this case, Grilli bases his right to ownership on the lease agreement.
The Court finds that such lease agreement is void as it violates PD 471. It provides that the maximum
period allowable for the duration of leases of private lands to aliens or alien-owned corporations,
associations, or entities not qualified to acquire private lands in the Philippines shall be twenty-five (25)
years, renewable for another period of twenty-five (25) years upon mutual agreement of both lessor
and lessee. It also provides that any contract or agreement made or executed in violation thereof shall
be null and void ab initio.

Since the term for the lease in this case was for 25 years, it is void ab initio. Consequently, the
complaint for unlawful detainer must fail.

Whether the In Pari Delicto Principle is applicable? –NO

The application of the doctrine of in pari delicto is not always rigid. An accepted exception arises when
its application contravenes well-established public policy. n the present case, both Grilli and Fullido were
undoubtedly parties to a void contract. Fullido, however, was not barred from filing the present petition
before the Court because the matters at hand involved an issue of public policy, specifically the
Constitutional prohibition against land ownership by aliens. As pronounced in Philippine Banking
Corporation v. Lui She, the said constitutional provision would be defeated and its continued violation
sanctioned if the lands continue to remain in the hands of a foreigner. 40 Thus, the doctrine of in pari
delicto shall not be applicable in this case.

Notes

1.) Requisites for Unlawful Detainer:

a. (1) initially, possession of property by the defendant was by contract with or by
tolerance of the plaintiff;
b. (2) eventually, such possession became illegal upon notice by plaintiff to defendant of
the termination of the latter's right of possession;
c. (3) thereafter, the defendant remained in possession of the property and deprived the
plaintiff of the enjoyment thereof; and
d. (4) within one year from the last demand on defendant to vacate the property, the
plaintiff instituted the complaint for ejectment.
2.) If a lease to an alien had an option to buy, it would be violative of the Constitution.

Melecio Domingo v. Spouses Genaro Molina and Elena Molina

Spouses Domingo bought a property in Tarlac consisting of a one-half undivided portion over an 18,164
square meter parcel of land. During his lifetime, Anastacio (the husband Domingo) borrowed money
from spouses Molina. Flora (the wife Domingo) died. Anastacio allegedly sold his interest over the land
to the Molinas before he died. he sale of Anastacio's interest was registered under a TCT. Anastacio
died. Melecio, one of the children of Anastacio and Flora, learned of the transfer and filed a Complaint
for Annulment of Title and Recovery of Ownership. He alleged that the sale of conjugal property was
invalid as it was without the consent of Flora, and the sale was fraudulent

Whether the sale was valid –YES

We must note here that what was sold by Anastacio was his undivided interest in the property. When
one of the spouses in a marriage dies, the properties of a dissolved conjugal partnership fall under the
regime of co-ownership among the surviving spouse and the heirs of the deceased spouse until final
liquidation and partition. The surviving spouse, however, has an actual and vested one-half undivided
share of the properties, which does not consist of determinate and segregated properties until
liquidation and partition of the conjugal partnership. As per Art 493 of the Civil Code(See Note 1) , a co-
owner may alienate his right over the property. In this case, when Anastacio sold his right to the
Molinas, such sale effectively transferred, making the spouses Molina a co-owner of the subject
property to the extent of Anastacio's interest.

Whether there was fraud –NO

This is a question of fact already resolved by the lower courts. There is no compelling reason to overturn
the findings of the lower court that there was no fraud.

Notes

1.) Article 493. Each co-owner shall have the full ownership of his part and of the fruits and benefits
pertaining thereto, and he may therefore alienate, assign or mortgage it, and even substitute
another person in its enjoyment, except when personal rights are involved. But the effect of the
alienation or the mortgage, with respect to the co-owners, shall be limited to the portion which
may be allotted to him in the division upon the termination of the co-ownership. (399)

Ridad vs Philippine Investment

The Ridads bought 2 cars on an installment basis. To secure payment, they entered into a chattel
mortgage not only on the two vehicles purchased but also on another car (Chevrolet) and plaintiffs'
franchise or certificate of public convenience granted by the defunct Public Service Commission for the
operation of a taxi fleet (SO THERE WERE 3 MORTGAGES). The rights to the mortgage were later
assigned to Filipinas Investment and Finance Corporation (FIFC) The Ridads were not able topay and so
the FIFC foreclosed the mortgage over the 2 cars. The cars were sold in an auction (FIFC were the
winning bidders). FIFC then held another auction for the remaining properties as bligation was not fully
satisfied. Ridad filed an action for annulment of contract relating to the mortgage of the franchise. The
lower court granted the petition. Hence this petition.

Whether the 2nd auction sale was valid? –NO

Art 1484 (See Note 1) of the NCC gives the vendor of personal property the purchase price of which is
payable in installments, has the right, should the vendee default in the payment of two or more of the
agreed installments, to exact fulfillment by the purchaser of the obligation, or to cancel the sale, or to
foreclose the mortgage on the purchased personal property, if one was constituted. THESE REMEDIES
ARE IN THE ALTERNATIVE IN NOT CUMULATIVE

Having chosen to foreclose the chattel mortgage, and bought the purchased vehicles at the public
auction as the highest bidder, it submitted itself to the consequences of the law as specifically
mentioned, by which it is deemed to have renounced any and all rights which it might otherwise have
under the promissory note and the chattel mortgage as well as the payment of the unpaid balance

Notes

1.) "Art. 1484. In a contract of sale of personal property the price of which is payable in
installments, the vendor may exercise any of the following remedies:
a. Exact fulfillment of the obligation, should the vendee fail to pay;
b. Cancel the sale, should the vendee's failure to pay cover two or more installments;
c. Foreclose the chattel mortgage on the thing sold, if one has been constituted, should
the vendee's failure to pay cover two or more installments. In this case, he shall have no
further action against the purchaser to recover any unpaid balance of the price. Any
agreement to the contrary shall be void."